MGM Resorts posts “outstanding” Q1 as BetMGM profits near and NYC casino bid continues

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MGM Resorts CEO Bill Hornbuckle described the group’s Q1 performance as outstanding, with strong double-digit growth in topline and bottom-line figures in multiple geographies as it continues to gather momentum both online and in land-based operations. 

Publishing its Q1 financial results, MGM recorded total revenues of $3.9bn, up 36% year-over-year, driven by its acquisition and integration of The Cosmopolitan and offset by the sale of The Mirage and Gold Strike Tunica

However, those divestitures pushed the firm’s bottom line up as the operating income stood at $731m, up exponentially from the $106m recorded in Q1 of 2022.

MGM’s Las Vegas land-based operations generated net revenues of $2.2bn in Q1, up 31% YoY thanks to the contribution of The Cosmopolitan and an increase in business volume across its portfolio. 

Meanwhile, the regional properties also saw revenues increase, albeit more modestly, growing 6% YoY to $946m as customers engaged in more non-gaming activities. 

Hornbuckle stated: “MGM Resorts posted just an outstanding quarter of financial performance to start 2023 driven by another record Las Vegas quarter and significant recovery at our MGM China.

“MGM Resorts offers steady earnings power through our existing operations and world-class brands, plus significant growth opportunity through our digital business, the recovery in Macau and our development opportunities. Our balance sheet boasts impressive strengths with $4.5 billion of cash, excluding MGM China, as shown in the presentation.”

BetMGM making positive progress as online casino leadership reiterated

On the online side of things, MGM reiterated the positive results that Entain revealed in its own Q1 earnings report a few weeks ago. BetMGM is “on track” to hit revenues of up to $2bn this year whilst also set for profitability in H2 of this year. 

The positivity around BetMGM was felt on the earnings call, with analysts and investors excited about the future of the venture, which is live in 26 states after launching in both Ohio and Massachusetts in Q1. 

This positivity sparked a question of the long-term future of BetMGM, as investors asked whether MGM could once again make a bid for Entain in the foreseeable future. 

MGM did make a bid for its joint-parent company in 2021 but, after it was rejected, the group has poured water over its interest, stating that it is content with its current relationship. This stance did not change much when Hornbuckle addressed investors. 

He said: “We’re very excited about what’s been created, obviously, to think after this amount of time, we could have a $2bn top-line business this year, which is showing all signs of profitability, is exciting for us. We have tens of thousands of customers that are driving, on an omnichannel basis, over $100m a year back and forth. And so that part of the business is starting to click in and starting to work.

“We’ve got some work to do on the sports product. Obviously, we’re market-leading in igaming at 28% share and no one even comes close to that, but we’re mindful that people are trying. So we’re very focused on it. So I’m not going to have a precursor where we go with all of this. I think we’re in great shape. We’ve got another couple of years to mature this business and see where it ends. And then we’ll take it from there.”

As the CEO alluded to, BetMGM is the market leader in online casino, with 28% market share in the US. This, according to investors, leads some to think that profitability could indeed be on the cards later in the year as online casino naturally has larger margins than sports betting. 

Yet, onlookers are eager to know whether this profitability is sustainable and consistent, given that other operators have recorded profitable quarters but then fell back into negative periods. 

“Look, the second quarter last year for us showed a little bit of profit,” Hornbuckle remarked. “If you may recall, the third quarter like everyone, we bounced into or bumped up to football, which is always a big promotional push at the beginning of football. I don’t suspect that will change much. Obviously, there are a few players. We’ve all become a lot more disciplined. 

I think it will be a little lumpy, but I think the bottom line will be going in. The second half of the year, we’re going to show profitability in totality. And obviously, igaming for us is a key thing, recognizing it’s in 5 states, 6 states, of which 3 are meaningful for us.”

New York City casino updates

Elsewhere in the business, a major development that MGM is focused on is its bid to obtain a casino license in New York. With the New York Gaming Facility Location Board putting out its RfP in January, operators have submitted questions ahead of formal applications being lodged in the summer. 

The bid is an expensive endeavor, however, with MGM setting aside $2bn in CapEx for the project, which includes the $1bn required for the license application and minimum investment requirement set out by the board. 

Hornbuckle put some color on the canvass of the project, and hinted at some of the prospective casino’s features: “Should we win a license to New York, our plan is for extensive property improvements such as a new 5,000-seat theater, new food and beverage outlets, covered parking and an increase overall to the casino floor space. We will share more specifics as part of our submission process continues.”

With the project costing such a large amount, attention has already turned to potential financing options and, with MGM having a large partnership with landlord VICI Properties, the CEO indicated that there could be a further deal to do in the Big Apple.

“I think there is some flexibility. Not to speak for VICI, of course, but they are fantastic partners of ours. And as we plan for that project and think about the ways in which we will finance it and the best way to allocate our capital, doing a sale-leaseback with VICI at some point certainly could make a lot of sense for us, and that’s part of our planning.”

Rounding up the financial outlook of the company, MGM noted that it had earned net income of $467m up from a loss of $18m in Q1 of last year as the sales of Gold Strike Tunica and The Mirage helped boost bottom line results. The firm’s adjusted EBITDAR was $1.1bn, whilst cash flow stood at $564m. 

“MGM Resorts achieved net cash flow provided by operating activities of $704 million and Free Cash Flow of $564 million during the first quarter,” said Jonathan Halkyard, Chief Financial Officer and Treasurer. 

“Our balance sheet continues to improve as we received $450m in gross cash proceeds from the sale of Gold Strike Tunica and repaid $1.25bn in unsecured notes upon maturity during the quarter. 

“With $4.5bn of cash on the balance sheet, we expect to continue to return capital to our shareholders through ongoing stock repurchases and pursue long-term growth opportunities through international digital acquisitions and the development opportunities we have with Japan and New York.”